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Thursday, December 29, 2011

The California Supreme Court has issued its decision in Harris v. Superior Court (Liberty Mutual Insurance). I will post more later, but for the time being, here's the headline:

This litigation tests
whether certain insurance company claims adjusters are exempt employees, not
entitled to overtime compensation under the Labor Code and regulations of the
California Industrial Welfare Commission (IWC or Commission). Reviewing the trial court’s denial of a
summary adjudication motion, the Court of Appeal held the adjusters are not
exempt employees as a matter of law. In
doing so, the Court of Appeal misapplied the substantive law. We reverse.

The plaintiffs alleged that the defendant violated two separate provisions of Industrial Welfare Commission (IWC) Wage Order No. 4-2001. They alleged that defendant: (1) failed to pay reporting time pay for days when they were required to report to work just to attend work-related meetings; and (2) failed to pay split shift compensation for days on which they attended a meeting in the morning and worked another shift later the same day.

The trial court granted motions for summary judgment against two of the named plaintiffs. The Court of Appeal affirmed, issuing three holdings of note.

First, the defendant did not have to pay the plaintiffs “reporting time pay” for attending meetings at work, because all the meetings were scheduled, and the plaintiff worked at least half the scheduled time, even if the scheduled time was less than four hours. In other words, if an employee's only scheduled work for the day is a mandatory meeting of one and a half hours, and the employee works a total of one hour because the meeting ends a half hour early, the employer is not required required to pay reporting time pay pursuant to subdivision 5(A) of Wage Order 4 in addition to the one hour of wages because the employee was furnished work for more than half the scheduled time. Slip op. at 10.

Second, the defendant did not owe the plaintiffs additional compensation for working “split shifts” because on each occasion he worked a split shift he earned more than the minimum amount required by the wage order. Slip op. at 17. In other words, the plaintiff would be entitled to split shift pay only if his total earnings for the day were less than the number of hours worked, plus the split shift premium of one hour's pay, at the minimum wage rate. Ibid.

Third, the defendant could not recover its attorney fees from the plaintiffs because the claims arose under Labor Code section 1194, the one-way fee-shifting statute, rather than section 218.5, which allows either successful party to recover its fees. Slip op. at 22. "Ultimately, reporting time and split shift pay requirements serve the same general purpose as Labor Code section 1194." Slip op. at 25.

Thursday, December 15, 2011

The California Supreme Court held oral argument in Brinker on November 8, 2011. (You can view the oral argument on youtube.) The Court deemed the matter submitted as of that date, meaning that it would issue its opinion no later than 90 days later, or February 6, 2012.

On December 2, the Court granted permission to the California Employment Law Council to file an amicus brief regarding the retroactive application of the Court's opinion. Yesterday, the Court vacated its prior order deeming the case submitted and held that it will be deemed "resubmitted" on January 13, 2012:

Pursuant to California Rules of Court, rule 8.520(f)(7) and this court's December 2, 2011, order, the parties' answers to the amicus curiae brief of the California Employment Law Council, addressing the grounds for prospectively applying portions of this court's eventual decision on the merits, are due Tuesday, January 3, 2012. Each party may file a simultaneous reply to the other party's answer within 10 days thereafter. Submission of the cause is vacated. (See Cal. Rules of Court, rule 8.524(h)(1) [submission runs from expiration of the time in which to file briefs, including supplemental briefs].) The cause will be resubmitted on January 13, 2012.

The result is that we will have the opinion no later than April 12, 2012. Stay tuned.

On November 28, 2011, the Supreme Court of the United States granted certiorari in Christopher v. SmithKline Beecham Corp. (blogged here). The Ninth Circuit in Christopher upheld a district court's finding that pharmaceutical sales representatives (PSRs) are exempt employees under the Fair Labor Standards Act (FLSA).

Here are the questions presented:

The outside sales exemption of the Fair Labor Standards Act exempts from the overtime requirements of the Act "any employee employed ... in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary ...)." 29 U.S.C. § 213(a)(1). The Secretary of Labor has implemented various regulations that "define and delimit" the outside sales exemption and, filing as amici in this and other related matters, has interpreted these regulations to find the exemption inapplicable to pharmaceutical sales representatives. A split exists between the Second and Ninth Circuits concerning whether this interpretation is owed deference and whether the outside sales exemption of the Fair Labor Standards Act applies to pharmaceutical sales representatives.

The questions presented are:

(1) Whether deference is owed to the Secretary's interpretation of the Fair Labor Standards Act's outside sales exemption and related regulations; and

Like the California Fair Employment and Housing Act (FEHA), which contains similar language and embodies similar goals, Military and Veterans Code section 394, which prohibits employers from discriminating against members of the armed forces,allows servicemen and servicewomen plaintiffs to hold their employers, but not individual employees, liable for discrimination; and

At mediation, the parties agreed that the maximum recovery at trial would have been the unjust enrichment AOL received as a result of its footer advertisement sales, or about $2 million. Divided among the more than 66 million AOL subscribers, each member of the class would receive only about 3 cents. The cost to distribute these payments would far exceed the maximum potential recovery.

In lieu of a cost-prohibitive distribution to the plaintiff class, the parties agreed that AOL would provide certain notices to its subscribers and make a series of donations to Los Angeles area charities.

The district court (C.D.Cal., Judge Christina A. Snyder) granted preliminary and final approval, and an objector appealed. The Ninth Circuit affirmed in part and reversed in part. Noting that "The cy pres doctrine takes its name from the Norman French expression, cy pres comme possible, which means as near as possible," the Court held that the charitable donations here failed to meet the test for cy pres distributions. Six (6) Mexican Workers v. Arizona Citrus Growers (9th Cir. 1990) 904 F.2d 1301. Two thirds of the donations would be made to Los Angeles-area charities. The proposed donation to the Federal Judicial Center Foundation would benefit a national organization, but this organization has no apparent relation to the objectives of the underlying statutes, and it is not clear how this organization would benefit the class. The Court thus concluded that the district court applied the incorrect legal standard and abused its discretion in approving the proposed cy pres distribution. Slip op. at 6. The Court even suggested that the parties find a beneficiary that "works to protect internet users from fraud, predation, and other forms of online malfeasance." Ibid.

The Court rejected the contention that Judge Snyder should have recused herself because her husband sat on the board of one of the proposed cy pres beneficiaries, the Legal Aid Foundation of Los Angeles. Id. at 6-7.

Can a defendant in a putative class action defeat or moot the action by settling with the putative class representative -- or merely by offering to settle?

In Pitts v. Terrible Herbst, Inc., --- F.3d ----, 2011 WL 3449473 (9th Cir. 8/9/11) (blogged here) the Ninth Circuit held that a full value offer to a putative class representative in an action under the Fair Labor Standards Act (FLSA) and Nevada state law does not moot the action. In Damasco v. Clearwire Corp., --- F.3d --- (7th Cir. 11/18/11), the Seventh Circuit held that such a full-value offer, if made before a class certification motion is filed, renders the putative collective action moot.

In Pirjada v. Superior Court (Pacific National Security, Inc.) (12/12/11), the Second District Court of Appeal held that the trial court (L.A. Superior Court, Judge Michael M. Johnson) did not abuse its discretion in denying as moot counsel's motion to compel defendant to identify the putative class members in response to pre-settlement discovery requests:

[T]he decision to deny the motion to compel was also within the broad discretion of the court: By the time the motion was filed, the court had already chosen other means to protect the absent class members—it gave [counsel] leave to amend the complaint after using informal means to identify potential replacement class representatives and deferred any determination whether the entire case should be dismissed and, if so, how to comply with the notice requirements of Rule 3.770(c), to a later date. Although the court's decision to deny [counsel's] motion for notice to the class was based largely on a distinction between consumer and employee class actions, a distinction we implicitly rejected in Belaire–West Landscape, Inc. v. Superior Court, supra, 149 Cal.App.4th 554, the propriety of that ruling is not before us. [Counsel] did not seek writ review of the court's May 26, 2011 order. Instead, it elected to proceed by way of a motion to compel. The court's subsequent decision to deny that motion, finding the outstanding discovery requests propounded by Pirjada moot in light of his individual settlement, was in no way arbitrary or capricious or otherwise in excess of the bounds of reason.

Slip op. at 8. The Court also rejected counsel's argument that the trial court's refusal to require the defendant to identify the class members would interfere with notice to the class prior to dismissal of the action. The court noted that the trial court had not yet dismissed the action and held, in essence, that the trial court should cross that bridge when it comes to it. At that point, counsel "will have an opportunity to demonstrate to the court that some form of notice is
required to avoid prejudice to absent class members." Slip op. at 9.

In 2009, the Ninth Circuit asked the California Supreme Court to rule on certain issues regarding work performed inside and outside of California by non-California residents.

In Sullivan v. Oracle Corp. (2011) 541 Cal.4th 1191 (blogged here) the California Supreme Court held: (1) California's overtime requirements apply to work performed in California for a California employer by non-residents; and (2) Business and Professions Code section 17200, known as the Unfair Competition Law or "UCL" applies to such overtime work; but (3) the UCL does not apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs.

In an opinion yesterday, the Ninth Circuit addressed two remaining issues, holding that application of the California Labor Code to non-residents working in California does not violate violates Due Process Clause of the Fourteenth Amendment or the Dormant
Commerce Clause of the United States Constitution. Sullivan v. Oracle Corp., --- F.3d ----, 2011 WL 6156942 (9th Cir. 12/13/11).